All posts tagged PBOC

Officials from around Asia-Pacific welcomed the apparent resolution to the U.S. debt ceiling impasse Monday, but warned that it was just a first step toward getting America’s debt problem under control.

“This is such an important step, but they’ve got to go to the next step,” Australian Treasurer Wayne Swan told SkyNews television. “We’ve got to see a pathway from fiscal consolidation in the U.S. We need that for global certainty.”

“When it comes to safe-haven assets, there’s no alternative to U.S. Treasurys,” said Huh Jin-ho, chief of the Bank of Korea’s global economy research division.

With new numbers showing China’s consumer price inflation continuing to accelerate, the People’s Bank of China on Sunday announced a 0.5 percentage point increase in the share of deposits banks must hold in reserve, otherwise known as the reserve requirement ratio. It was the fourth such move so far this year and came less than two weeks after the central bank raised benchmark interest rates. Analysts weigh in.

Beijing did not take long to respond to the strong inflation number on Friday. Governor Zhou [Xiaochuan] also struck a hawkish tone in comments made over the weekend, so this move comes as no surprise. We revised up our forecast for policy rates in response to the inflation data, and now expect another increase in the benchmark lending rate this quarter, in addition to the one we were already forecasting for later in the year. Today’s move suggest that another increase in interest rates is on the way soon. – Brian Jackson, Royal Bank of Canada

The timing of today’s interest rate hike in China is something of a surprise given more dovish comments in recent days from senior officials, but the rate move is not entirely unexpected. The announcement may cause jitters about the impact tightening will have on Chinese growth. However these should not be overplayed. The latest increases of 25 basis points for one-year deposits and loans are in line with the gradual policy tightening that has been underway over the last few months and will not do much to slow the economy. The benchmark one-year lending rate now stands at 6.31%, still low relative to the pace of economic growth. The constraint on credit growth is the amount that banks can lend rather than the rates they charge. – Mark Williams, Capital Economics

Asian central banks could be spurred to increase rates as they take cues from China’s latest rate increase on Tuesday, meaning further currency appreciation could be on the way. The Wall Street Journal’s Jake Lee and Hong Kong Bureau Chief Peter Stein discuss.

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